Minister of Finance Chrystia Freeland responds to a question from a reporter during a news conference, in Ottawa, on June 11.Adrian Wyld/The Canadian Press
The Liberal government got what it wanted on Tuesday when the House adopted a motion in support of raising taxes on the wealthy, but the Conservatives voted against it.
Finance Minister Chrystia Freeland will tell you that what the motion achieved was her party’s goal of greater tax fairness for Canadians. But what the Liberals really were after, and got, is a wedge issue designed to slow the momentum of the Conservative opposition under Pierre Poilievre.
It will be astonishing if this strategy actually changes the Liberals’ diminishing fortunes. It might even hurt them. This is not about tax fairness – this is about an exhausted government that has given up on governing.
Tax reform aimed at greater fairness and reducing income inequality is as serious as it gets. But, as this space has argued, the Liberal plan to raise the taxable portion of capital gains over $250,000 for individuals, and of all capital gains for corporations and most trusts, is not the end result of a careful examination of tax policy, but of the Liberals’ need to raise billions of dollars to plug a hole in their latest budget.
As bad as that is, the government made it worse by hiving off the capital-gains changes from its budget bill and announcing it would introduce them in a separate act – an obvious attempt to force the Conservatives to take a position on raising taxes for the wealthy.
Ms. Freeland drove that wedge home on Sunday in an over-the-top speech in which she described the consequences of any failure to support the tax increase: hungry schoolchildren, pregnant teenagers, crushing intergenerational debt and the wealthy living in walled communities while a wrathful mob roams the wasteland outside the gates.
Democracy itself would be in danger, she warned, and then added: “Pay attention to any member of Parliament voting against these changes and consider their motivation.”
Portraying opponents of her tax increase as the moral equivalent of a clueless aristocracy is typical of a government that creates divisive wedge issues when its electoral fortunes are on the line.
The Liberals did it with vaccine mandates in the 2021 election. Prime Minister Justin Trudeau was uneasy about mandates for most of that year, even after some of the provinces introduced them. When he called the election, though, suddenly they were an urgent public-health priority that just happened to be an effective wedge against the Conservatives.
At least vaccine mandates were the right policy at the right time. The increase to the capital-gains inclusion rate will take place when Canada’s lagging productivity needs a boost. Higher taxes on investment will be a drag on the economy and could harm our diminishing prosperity.
And they won’t just affect the super-rich. Doctors who operate as small businesses, and families that sell off long-held second properties, such as cottages, could also see their taxes raised.
Like their belated discovery of the benefits of supporting vaccine mandates, the Liberals’ claim that they are the only thing standing between Canada and the inequities of prerevolutionary France is nothing more than cynical politics.
They’ve had years in office to address the issues dominating Canadian politics today: housing costs, affordability and, yes, the income gap, which has grown steadily since 2015. They’ve partially addressed some of them, and even modestly lowered taxes for the poor and middle-class while increasing tax rates for incomes over $200,000.
But if you listen to Ms. Freeland, the Liberals haven’t exactly created a Canadian utopia during their time in office.
The Conservatives, no strangers themselves to apocalyptic rhetoric, may well pay a price for voting against the government motion, but they were right to do it – even if the Liberals use it to portray them as perfumed princes wandering in walled gardens, indifferent to the hungry children and torch-bearing mob beyond.
It is also possible that they won’t pay any price at all. The Trudeau government has had years to undertake a comprehensive reform of the tax system, and now suddenly it is in urgent need of fixing? The Conservatives countered on Tuesday that, if elected, they will launch a tax-reform task force within 60 days of taking office, reduce taxes for the poor and middle-class, end corporate subsidies and crack down on overseas tax havens.
This is what happens to governments that lose their way: they fall into their own traps.